Load up the larder
Tuesday, May 6, 2008 | | |I do not want to alarm anybody, but maybe it's time for Americans to start stockpiling food.
No, this is not an exercise.
You've seen the TV images of food riots in some parts of the developing world. Yes, they are far from the USA, but most foodstuffs are operating in a global marketplace. When the cost of wheat rises in Asia, it will do the same here.
More from WSJ.com:
• When neighbouring farmers Become
• points racking on your credit score
• You can not take the Envy Car Bank
Reality: The prices of foodstuffs are already growing much faster than yields are likely to get you to keep your money in a bank or money-market funds. And there are very good reasons to believe prices on the shelves are about to launch an increase much faster.
"Load pantry," said Manu Daftary, a top Wall Street investors and the manager of the Quaker Strategic Growth mutual fund. "I think prices are going higher. People are too complacent. They think it will not happen here. But I do not know how food companies can absorb higher costs." (Full disclosure: I am a strategic investor in Quaker)
Stocking food May not replace long-term investment, but May to welcome to some of your short-term cash. Do the math. If you keep your day cash in a money market fund you will have the chance to obtain a 2.5% interest rate. Even the best one-year certificate of deposit you can find is only going to pay you about 4.1%, according to Bankrate.com. And these returns are before tax.
Meanwhile the latest government figures show inflation food for the average American household is currently at 4.5% per annum.
And some prices are rising even faster. The latest data show an increase in grain prices by more than 8% per annum. Both flour and rice are up over 13%. Milk, cheese, bananas and peanut butter same: They are all up more than 10%. The eggs have exploded up 30% in one year. Ground beef prices are up 4.8% and 5.4% chicken.
These are trends that have been established for some time.
And if you're hoping they will pass, here is the bad news: They actually accelerate May.
The reason? The prices of many raw materials underlying grew much faster. The price of wheat, for example, have almost tripled over the past three years.
Sooner or later, food companies will have to pass these costs. Kraft has seen its raw material costs rise by nearly 1.25 billion dollars last year, the pressure profit margins. The company recently warned that higher prices are here to stay. Last month, the CEO of General Mills, Kendall Powell, made a similar point.
The main reason for rising prices, of course, is the surge in demand from China and India. Hundreds of millions of people join the middle class each year, ie they want to eat more and better food.
A second reason was the growing demand for ethanol as a fuel additive. It is a little soaking corn supply.
You can not easily, you can buy perishables such as eggs or milk. But other products will keep. Among them: Dried pasta, rice, cereals and cans of everything from tuna to fruits and vegetables. The best: You should also save money by buying in bulk.
If this seems a stretch, ponder this: The new bull market for agricultural products is following in the footsteps of oil. A few years ago, many Americans expect $ 2 gas was a temporary peak. Now is the pink memory of a past age.
The good news is that it is easier to store Cap'n Crunch or cans of StarKist in your house that store much gasoline. Safe, too.
No, this is not an exercise.
You've seen the TV images of food riots in some parts of the developing world. Yes, they are far from the USA, but most foodstuffs are operating in a global marketplace. When the cost of wheat rises in Asia, it will do the same here.
More from WSJ.com:
• When neighbouring farmers Become
• points racking on your credit score
• You can not take the Envy Car Bank
Reality: The prices of foodstuffs are already growing much faster than yields are likely to get you to keep your money in a bank or money-market funds. And there are very good reasons to believe prices on the shelves are about to launch an increase much faster.
"Load pantry," said Manu Daftary, a top Wall Street investors and the manager of the Quaker Strategic Growth mutual fund. "I think prices are going higher. People are too complacent. They think it will not happen here. But I do not know how food companies can absorb higher costs." (Full disclosure: I am a strategic investor in Quaker)
Stocking food May not replace long-term investment, but May to welcome to some of your short-term cash. Do the math. If you keep your day cash in a money market fund you will have the chance to obtain a 2.5% interest rate. Even the best one-year certificate of deposit you can find is only going to pay you about 4.1%, according to Bankrate.com. And these returns are before tax.
Meanwhile the latest government figures show inflation food for the average American household is currently at 4.5% per annum.
And some prices are rising even faster. The latest data show an increase in grain prices by more than 8% per annum. Both flour and rice are up over 13%. Milk, cheese, bananas and peanut butter same: They are all up more than 10%. The eggs have exploded up 30% in one year. Ground beef prices are up 4.8% and 5.4% chicken.
These are trends that have been established for some time.
And if you're hoping they will pass, here is the bad news: They actually accelerate May.
The reason? The prices of many raw materials underlying grew much faster. The price of wheat, for example, have almost tripled over the past three years.
Sooner or later, food companies will have to pass these costs. Kraft has seen its raw material costs rise by nearly 1.25 billion dollars last year, the pressure profit margins. The company recently warned that higher prices are here to stay. Last month, the CEO of General Mills, Kendall Powell, made a similar point.
The main reason for rising prices, of course, is the surge in demand from China and India. Hundreds of millions of people join the middle class each year, ie they want to eat more and better food.
A second reason was the growing demand for ethanol as a fuel additive. It is a little soaking corn supply.
You can not easily, you can buy perishables such as eggs or milk. But other products will keep. Among them: Dried pasta, rice, cereals and cans of everything from tuna to fruits and vegetables. The best: You should also save money by buying in bulk.
If this seems a stretch, ponder this: The new bull market for agricultural products is following in the footsteps of oil. A few years ago, many Americans expect $ 2 gas was a temporary peak. Now is the pink memory of a past age.
The good news is that it is easier to store Cap'n Crunch or cans of StarKist in your house that store much gasoline. Safe, too.
